June 24, 2007

Housing industry still looking for the bottom

Housing industry still looking for the bottom

“I still think we're not at the bottom in terms of housing construction,” said Mark Vitner, a senior economist at Wachovia Corp. “Sales have to bottom out first. ... We haven't seen that yet. And then construction starts will probably bottom out six to nine months after that."

Hardest hit have been regions that were enjoying the most rapid growth during the height of the housing boom, including California, Florida, Arizona and Nevada. Homebuilding showed signs of strength some Northeast and Midwest market. But homebuilders like Robert Toll, CEO of Toll Brothers, say it’s too soon to say whether the industry has hit bottom.


Weak housing drives down Toll profits
By Ilaina Jonas

NEW YORK (Reuters) - Toll Brothers Inc. (TOL.N: Quote, Profile, Research) on Thursday said the weak U.S. housing market drove down its quarterly profit 67 percent after write-downs for lower land values, and the luxury home builder lowered its forecast.

U.S. housing demand has dropped over the course of the year on higher prices and interest rates, and Toll said it could not yet see a rebound going into the industry's spring selling season.

Home Foreclosures Hit Fresh High And May Continue to Increase
By Damian Paletta and James R. Hagerty

A record number of homeowners entered the foreclosure process during the first quarter, topping the previous high set in the final quarter of 2006 and reflecting continued stress on the jittery housing market, according to a report released by the Mortgage Bankers Association.

The trade group's chief economist, Doug Duncan, predicted that delinquencies would likely rise, peaking later in the year. He also said rising foreclosures probably wouldn't peak until next year. "Our view is that we will probably see modest increases in delinquencies and foreclosures for the next couple of quarters," Mr. Duncan said.

Borrowers are having more trouble meeting payments as house prices flatten or decline in much of the country and as many loans that had low introductory rates reset to sharply higher ones.

In a research note, economists at Goldman Sachs noted that the first-quarter data reported yesterday don't fully reflect the effects of tighter credit, which started taking hold late in the quarter. The figures also don't reflect the recent surge in interest rates, which will push up costs for borrowers with adjustable-rate mortgages. "So future reports are likely to show further deterioration, perhaps at a faster rate," the Goldman report said.

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